Fisker Automotive Inc. was allowed to keep spending the funds derived from a loan provided by the United States Energy Department despite violating its terms multiple times, according to a report by research company PrivCo. The report says that The Energy Department, which provided Fisker with a $529 million line of credit in 2009, already knew by December 2010 that the luxury plug-in carmaker was not meeting breakthroughs required to keep using money from the loan.
PrivCo said its report was on documents obtained through the Freedom of Information Act. The report remarked that while the Energy Department severed Fisker's funding in June 2011, the carmaker already drew around about $193 million, thereby leading to further loss in taxpayer money.
PrivCo chief executive Sam Hamadeh remarked that the Energy Department made a mistake in awarding the loan and should have cut it off as soon as it became evident that Fisker “had begun to default."
Fisker halted its car-making operations in late 2012 and has retained Kirkland & Ellis LLP, a law firm with one of the largest U.S. bankruptcy practices. Fisker sent home around 75% of its workers on April 5, 2013 after building only 2,500 units of the $103,000 Fisker Karma plug-in, which is assembled in Finland. The report noted that Fisker's first repayment of $20.2 million on the loan is due April 22.
Hamadeh remarked that Fisker’s technical defaults started in 2011 and entailed having lower-than-required earnings before interest, taxes, depreciation and amortization (EBITDA) and failing to meet a production landmark of at least 11,000 vehicles sold to dealers for an average of $87,500 by Sept. 30, 2011. A U.S. House panel will have a hearing on April 24, 2013 regarding Fisker and its government financing.